Due diligence is the process of doing research and analysis on a property to ascertain the probable performance and stability of the investment.

At Meridian Pacific Properties, we perform meticulous due diligence on behalf of our clients so they that they do not have to. Having been investors ourselves for over 20 years having done hundreds of transactions, we understand the process and know exactly what to look for.

Properly done, due diligence encompasses several aspects of the property:

- Location

- Condition

- Property management and tenants

- Pro forma financial performance

- Ancillary services

Location. At Meridian Pacific Properties, we have analyzed data on the 366 metropolitan statistical areas (MSA’s) tracked by the U.S. government, in addition to research data and paid database services, to identify the best investment locations in the nation. Some of the data that we analyze in the various MSA’s include:

- Median home price history over 30 years

- Appreciation projections

- Rents relative to home values (the rent ratio)

- Regional rent history and trend

- Real estate market stability

- Regional unemployment rates and employment trends

- Major regional employers

- Economic forecast

- Home valuations relative to median incomes

- Property tax rates

- Insurance rates

- Flood zone characteristics

- Weather and geographic factors (e.g. tornados, hurricanes, earthquakes, earth movement potential, cold weather, etc.)

We physically visit the metro areas that we have selected and work with local real estate experts to identify the best zip codes, subdivisions or neighborhoods, and streets that offer the attributes that we seek (and characteristics that we seek to avoid). We are in daily contact with our teams on the ground in the various areas in which we sell investment property.

Condition. Once we have established the areas in which we offer properties, we select, on average, one out of twenty homes that we evaluate to bring into our inventory and renovate. We validate based on a physical inspection that when we complete our renovations that the investment property will meet our quality standards for the following:

- Cosmetic appearance, inside and out

- Structural integrity: framing, walls, and roof

- Systems: electrical, plumbing, and HVAC

- Painting, flooring, countertops and fixtures

- Landscaping and outdoor structures

Property management and tenants. After acquiring an investment property, the most important ongoing relationship will be with the property manager. All property managers that Meridian uses and recommends must meet Meridian’s standards for performance. We have examined their management agreements, leasing agreements, tenant qualification criteria, fee schedules, and accounting systems to our satisfaction. We are especially mindful of the property manager’s track record for vacancy performance, which can be one of the more important determinants of cash flow.

Pro forma financial performance. We carefully examine and financially model all of the properties that we sell to determine the pro forma returns on investment as measured by cash-on-cash return and 5-year internal rate of return. All of the elements that are needed are included in this analysis, including purchase price, prevailing interest rate, monthly rent, vacancy and maintenance allowances, property taxes, insurance rates, mortgage payments, appreciation rate, expense inflation rate, closing costs and sales costs. All properties that we sell must meet our strict standards for financial performance before we will consider acquiring and renovating them.

Ancillary services. There are a number of other service providers that we evaluate that are part of acquiring a strong investment property, including competitive lenders, title and escrow companies, construction contractors, insurance brokers, property inspectors and appraisers. We evaluate the service providers that we recommend on the basis of their professionalism, competitive rates, quality of service and communication.

Due diligence is critical to the success of any investment. When done properly, it can be a long and potentially tedious process that involves knowledge and attention to detail.

Meridian Pacific Properties is known for its integrity and attention to detail, and is well known for its meticulous due diligence. Why not work with a partner you can trust?